PENSION PLANNING
Starting a Pension
A personal approach
Whether you are a company director, business owner, partner, self-employed, an employee or even a non-earner, it is possible to start paying into a pension. The great part is you can take advantage of the valuable tax breaks on offer with pensions.
Pension funding can begin at any age from birth onwards, as contributions can be paid on behalf of others, including children. Final pension funds no longer need to be exchanged for annuities at a prescriptive age, so choices can be retained throughout retirement.
Of course, it is never too late to improve your pension funding position, however it makes sense to start as soon as possible as contributions paid in early provide the best prospects for growth. This could mean that you may be able to pay in less or retire earlier than someone who starts later.
Your IWP consultant will help you to put a plan in place for what you hope to achieve out of your retirement. We recognise that everyone’s situation is different and take this into account when setting up your plan. Generally speaking, there are just three steps to get up and running:
Step 1 – We will get to know you and your financial situation.
Step 2 – We will research and report back to you and then discuss and guide you on your options.
Step 3 – We take care of the paperwork and process to get your pension started.
In the first step, we will assess your options, including all suitable tax-approved pensions, such as personal pensions, self invested personal pensions and any employer schemes. All of the options available to you, will be explained, so you will understand what they all offer.
Once a suitable product and product provider has been chosen, this is followed by selecting the investments. Again, we will explain all the options and provide recommendations suitable to your own circumstances, aims and attitude to risk. Your attitude to risk is an important factor as there is a wide choice of allowable investments, so whether you are a very risk averse investor or highly speculative, there are options available to suit.
Once you have worked out how much you want to save, your consultant will guide you through all the paperwork too and take care of the whole process.
You can choose to pay in small regular contributions, make ad hoc payments or a combination of the two. Regular contribution levels can be set to suit your budget and the amount you pay in can be varied to take into account any changes in your circumstances.
For all but the very highest earners (who may choose to pay in more than the generous Annual Allowance), the money you save in your pension will benefit from tax relief. This means that more goes into your pension than you pay yourself.
For employees paying basic rate tax, the relief on any pension contributions is provided automatically. This turns each £80 you save into £100 paid in. For non-tax payers, up to £3,600 can be paid in each year with this same tax relief. This means that although you are not paying income tax, you still get the benefit of a 20% uplift in the amount going into your pension.
For higher rate tax payers, a full 40% relief is available up to generous limits, with the first 20% being automated, and the remaining 20% provided through self assessment. This means that for every £60 paid in by you, £100 is invested in total.
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